Housing construction hits yearly record of $77.2 billion in September quarter

The value of home-building rose to a record $77.3 billion in the year to September, as a resilient sector kept total construction growing despite a quarterly dip.

Total residential construction rose 2.4 per cent over the four quarters from $75.4 billion a year earlier, more than enough to offset the 1 per cent slip in home-building in the three months to September, official figures on Wednesday showed.

The figures show the resilience of a home-building sector that was expected to slow earlier, given the loss of tax breaks and tighter credit curbs on investor buyers who have underpinned new apartment construction. Construction of standalone houses has also held up in the wake of continued population growth and rising demand.

Apartment construction is likely to decline in coming months. James Alcock

"We're still in for a slowdown," said Shane Garrett, Master Builders Australia chief economist. "A lot of the work that would have taken place in July, August and September – a lot would have been work started before the current difficulties got underway. That's mainly why the figures are elevated."

"We retain the view that residential investment will be a persistent, though modest drag on GDP over the coming year," Mr Kennedy said.

Investment uncertainty

Home-building slipped to $19.6 billion in the three months to September from $19.8 billion in June in seasonally adjusted terms.

Non-residential commercial construction also posted a weaker quarter, falling 2.4 per cent from June to $10.5 billion. It was the first quarterly decline in nine quarters, however, and over the year to September, the total $42.6 billion-worth of work was a new annual record.

The figures still cast a cloud on the outlook for business investment, said UBS economist George Tharenou.

"The continued weakness in private non-residential construction suggests uncertainty over the business investment outlook," Mr Tharenou said.

Engineering construction also fell for the quarter, marking a 4.5 per cent decline from June's $24.1 billion to $23 billion.

The 7.5 per cent quarter-on-quarter decline in privately funded engineering work added to a level of overall weakness in construction output that Mr Tharenou said was a surprise.

Still, the volatile figures for engineering construction, driven largely by public spending on projects such as roads and rail, were likely to grow, Mr Garrett said.

"A lot sectors are going to benefit in the run-up to the federal election," he said. "That work will be accelerated."